Sometimes situations arise that prevent a taxpayer from paying their tax liability in full when it comes due. The IRS has many tax installment payment programs for qualifying individuals who find themselves in these situations. The tax specialists at AG Tax are experienced in working with the IRS to determine which tax installment payment program best fits your needs based on your tax situation. Let’s take a minute to go over the different tax installment payment options available.
Need more Time? What are the options?
• Additional time: If one can guarantee that they can clear the entire tax bill within a period of 120 days, they can qualify for a short-term agreement to pay taxes through the ‘Online Payment Agreement’ application available at IRS.gov.
• Fresh Start Initiative: The IRS expanded its “Fresh Start” initiative to help struggling taxpayers who owe taxes. Fresh Start makes it easier for individual and small business taxpayers to pay back taxes and avoid tax liens. The following relief extension is part of this initiative, you may consult your AG Tax advisor for further help:
o Penalty Relief is for qualifying unemployed taxpayers who fail to pay penalties. Penalties are one of the biggest factors a financially distressed taxpayer faces on a tax bill. The Fresh Start Penalty Relief Initiative gives taxpayers a six-month extension to fully pay recent past taxes with the fulfillment of certain conditions. Interest is still accrued on the amount outstanding, but failure to pay penalties may be avoided if conditions are met.
• Installment Agreement : If you can’t pay the tax bill in full at one time, cannot secure a loan, and cannot guarantee payment in 120 days, you might speak with your AG Tax consultant about investigating an Installment Agreement. To qualify you must have timely filed and paid any tax liabilities in the last 5 years. When in a formal Installment Agreement the IRS is less likely to file a federal tax lien which can adversely affect one’s credit scores. Based on the amount owed, these are the possible payment systems:
o Guaranteed Installment Agreements: If your balance due is $10,000 or less and if the monthly installment payments can be paid off in 36 months or less.
o Streamlined Installment Agreements: If the amount owed is $50,000 or less, and the taxpayer agrees to pay off the balance in 72 months or less. In cases where the due amount is more than $50,000, you must also complete additional forms to be accepted into the program.
o Partial Payment Installment Agreement : If the guaranteed and streamlined systems do not suit your budget you may consider the ‘Partial Payment Installment Agreement’. This is a type of payment plan where the monthly payment is based on what you can actually afford after taking into consideration your fixed living expenses. It covers a longer repayment term, but the IRS may file a federal tax lien to protect its interests in collecting the debts.
• Offer in Compromise : The ‘Offer-in-Compromise’ (OIC) program allows you to settle your tax debt for less than the actual owed amount depending on your current and future financial conditions. An OIC may be an option if you can’t fully pay your taxes through an installment or other payment alternative. The IRS may accept an OIC if the amount offered represents the most the IRS can expect to collect within a reasonable time or that payment in full would either create an economic hardship or would be unfair because of exceptional circumstances.
AG TAX LLP Can Help
AG Tax is experienced in dealing with IRS tax installment payment programs, and also doing preventative planning to ensure tax penalties are avoided. Reach out to us to help you analyze your current financial situation and tax issues in order to help you decide which program best suits your needs.
Additionally, if you have any other tax-related queries, and/or need assistance with tax planning/filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.